Consolidation, convergence and competition

When fixed mobile convergence was a hot topic 15 years ago, voice was at the centre of the debate and mobile was the market’s greatest leap forward since the invention of the telephone itself.

But as a number of European incumbents separated their fixed and mobile operations—that they might better compete with the fast-rising pure mobile players—the new generation went forth, vibrant with the confidence of youth that the world would bend to its design. Why look to convergence, after all, when you can drive substitution?

If there was one company that epitomised the swashbuckling self-certainty of the mobile sector it was Vodafone; the greatest of the European empire builders

Today convergence is more about the combination of fixed broadband and IPTV; a workable marriage of access and content. Voice is part of the package but it neither makes nor breaks the deal.

Mobile, meanwhile, sits often in isolation.

Vodafone’s move for Kabel Deutschland this week highlights service diversification as the new geography for expansionist mobile players. Germany is Vodafone’s biggest European market but mobile alone apparently offers insufficient potential. Fixed broadband and TV bundles represent greater opportunities for monetisation and, crucially, the chance to drive longer customer life cycles at a time when mobile operators are are being forced, either through regulation or competition, to hang up their contractual handcuffs.

The new CEO of Brazil’s Oi, Zeinal Bava—who has had success with bundled offerings in Portugal—said recently that IPTV offerings allow operators to play in a relatively low-churn environment. If service providers cannot drive customer life-cycles of seven or eight years, he suggested, they will not succeed. What percentage of mobile subscribers sit tight for the better part of a decade?

Of course all manner of wholesale and VNO models can be used to deliver bundled offerings but these will never offer the same level of integration that can be driven by ownership and control.

Calls for consolidation in the European mobile market grow louder by the week and four-operator markets look increasingly challenged. Now, those mobile operators that have already built scale seem to be suggesting that there is no option but to expand yet further through diversification.

The markets that are now held to be the industry’s leaders—the US, Japan and Korea—are each dominated by one or two operators that play across fixed, mobile, broadband and pay-TV.

The agencies responsible for European telecoms markets have a very delicate balance to strike. They need to decide whether regional leadership is more or less important than individual market dynamics. If they are wary of pure mobile consolidation how are they going to feel about wider activity?

If Europe must be made more competitive on the world stage, and there seems to be widespread belief that this is necessary—reflected not least in Neelie Kroes’ pledge to create a single European telecoms market inside a year—it surely must come at the expense of competition in individual markets.








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